Equity Discounted Cash Flow Model To Study The Applicability Of The Valuation Of The Shares Of Listed Companies In China

With development in china Capital Market, and the gradual perfection in governance of listed companies, the traditional method of pricing stock price has been unable to meet the needs of market envelopments. Also, the equity restructuring and the new accounting standards require the implementation of the present value measurement which stands of the fair value of the equity stock price. Equity Cash Flow Discount Model is the main assessment in West. China capital market development process lags behind the West, Currently, Equity Cash Flow Discount Model have not yet entered the stage of practical application. However, our environment in capital market improves and the management in corporation provides an objective basis for Equity Cash Flow Discount Model application. Equity Cash Flow Discount Model contains fair value and present value. Therefore, I chose Equity Cash Flow Discount Model and applied it to our existing capital markets to discuss whether the model is suit for our capital market now. For our capital market, it may give use reference on equity value assessment.First of all, put out some of the relevant definitions, such as cash flow, accounting gains, corporate cash flow, free cash flow, equity free cash flow. Choose the equity free cash flow as a basis for evaluation of equity value. On this basis, describes history of the classic theory equity cash flow model evolution and the premise of practice cash flow discount model. Also, according to the premise, give the analysis the application background of the existing capital market in our country and development of Chinese listed companies. The purpose is to discuss the feasibility of Equity Cash Flow Discount Model.Secondly, in the part of the empirical research, choose 40 A-shares in Shanghai security as samples, which listed before 1998.Use Equity Cash Flow Discount Model and Capital Asset Pricing Model to estimate the sample enterprise's equity value. Sample their market value as a reference, and do the correlation analysis, Gray correlation analysis between estimated equity value and the market value of the samples. From the empirical studies results analysis, there is high relevance between assess value of shares and the market value. So the author believes that if meet the basic assumptions of the model, under the premise stated herein parameters, the model can be used to evaluate China's listed companies' equity value.Finally, Empirical studies list some deficiencies in this research, from the analysis on angle of macro and micro, give recommendations on the application of the model, meanwhile, the paper also pointed out the study limitations and the prospects of application.